Chamber and committees

:That is an operational matter for Scottish Water as the employer. It currently employs nearly 5,000 staff. If it expands its operations, expanding the number of its employees is up to Scottish Water. All 5,000 staff continue to benefit from being part of the public sector pay policy. It is not right to say that the work, pay and conditions are not fair.

:The chief executive officer will be responsible for those issues.

I am a little confused. No concerns on that decision were raised with me by WICS. In fact, it is quite unusual for public bodies to have three separate executive roles. Scottish Water is being brought more into line with other public bodies.

I also want to reflect on having a member to specifically represent employee interests. The STUC was directly consulted on the appointment of that person. It commented on the scope of the role in 2020, before that was last advertised. The member was reappointed in 2025. Committee members want to know more about the credentials of that member. I am happy to liaise with Scottish Water and get it to give the committee that information. That seems to be the substantive ask of committee members—that you should know a little more about the credentials of the member with responsibility for employee interests.

:I will bring in James Simpson, because WICS has not raised anything—

:I will take the committee through the amendment order. It makes one technical but important change to the renewables obligation Scotland scheme. Currently, certain elements of the scheme known as the buyout price and the mutualisation cap rise each year in line with the retail prices index. From April this year, subject to parliamentary approval, those values will be updated using the consumer prices index, which will lead to savings in the energy system.

The renewables obligation Scotland scheme has supported renewable electricity generation in Scotland since 2002 by issuing certificates to generators that can then be sold to suppliers. Those electricity suppliers can use the certificates to meet their obligations under the scheme, or they can make a payment that is known as the buyout price. The amendment order will ensure consistency across the UK, which is essential for market stability, and it will ensure a level playing field for suppliers and generators that operate across borders.

The consumer prices index is recognised as a more accurate and reliable measure of inflation, whereas the retail prices index tends to produce higher inflation figures, which could lead to the buyout price rising faster than is justified. That would add unnecessary and avoidable costs on electricity suppliers, which are ultimately passed on to households and businesses. Switching to the consumer prices index will ensure fairness for consumers, while maintaining strong investor confidence in our renewables sector.

The change does not alter how the overall scheme works; it is a simple technical change to the annual indexation mechanism only. With the UK Government and the Northern Ireland Assembly, we jointly consulted to seek views on two options, which were an immediate switch to the consumer prices index or gradual realignment. Following careful consideration of the responses, all three Governments agreed to proceed with an immediate switch to the consumer prices index. We recognise that many industry stakeholders were initially concerned about the potential for change to undermine investor confidence and increase the cost of capital, but we consider that that approach strikes the appropriate balance between reducing costs for consumers and supporting continued investment in the renewables industry.

The change has no expected financial impact on the Scottish Government. We will continue to engage with industry stakeholders and monitor the operation of the scheme. It is a necessary and proportionate amendment to keep the scheme fair, efficient and aligned across the UK.

:No—I am fine, thank you.

:I am aware of the unions’ calls for that but there are no plans to do it. In 2002, when the Water Industry (Scotland) Bill was being considered, we considered how best to represent staff interests at the board level. At that point, the ability to have union representation on the board was rejected. Indeed, there is no worker representation on the board of any other public body. As per the Water Industry (Scotland) Act 2002, Scottish Water appointed a non-executive member who has specialist knowledge of employee interests. That person was reappointed in May 2025. Following the period of industrial action and strained industrial relations that Sarah Boyack mentioned, we sought greater clarity from Scottish Water’s director of people and director of governance that they are clear about their responsibilities to manage any potential conflicts.

To come to the other point that the unions made, I reject the assertion that Scottish Water is being privatised by stealth, if that is the phrase. I am proud to say—we should all be proud—that Scottish Water is a publicly-owned resource. We just have to look at the other parts of the United Kingdom where water is privatised. Last week, there were documentaries on television showing some of the disgraceful actions of private water companies. Every penny of Scottish Water profit is put back into improving the operations of water in Scotland.

We remain committed to a publicly-owned Scottish Water where all profits go into improving the service. Scottish Water is performing well as a publicly-owned corporation. If it contracts private companies, it is largely to do with capital expenditure programmes for improving infrastructure. Scottish Water has a large programme of work to improve its infrastructure throughout the country.

I therefore reject the characterisation that Scottish Water is being privatised. It is not privatised. It is in public hands and not a penny of profit goes to shareholders, which could not be said of other water companies in the UK.

I will take the committee through the instrument. Under the Water Industry (Scotland) Act 2002, Scottish Water must have a minimum of three executive members on its board. That statutory requirement is currently fulfilled by the appointments of the chief executive officer, the chief financial officer and the chief operating officer as executive members.

The simple purpose of the order is to reduce that requirement to a minimum of two executive members. It will support governance arrangements regarding executive representation that Scottish Water intends to implement upon the retirement later this year of the chief operating officer, whose role is not being backfilled. The CEO and CFO will remain executive members. The order will therefore help to ensure the effective administration and governance of the Scottish Water board and reflect changes to the senior management structure.

In line with the Public Services Reform (Scotland) Act 2010, I consider that the order will improve the exercise of Scottish Water’s public functions, particularly with regard to its economy, efficiency and effectiveness. The order will avoid a scenario in which Scottish Water is required to designate a new executive member with the associated remuneration when the board does not believe that to be the best course of action.

Effective oversight of Scottish Water’s executive will continue through the non-executive directors, whose composition and responsibilities will remain unchanged.

The Scottish Government consulted key stakeholders on the proposal, none of whom raised any substantive concerns. I will be happy to answer any questions that the committee may have.

You are right that the developers will put forward their own plans. However, their own plans might not be sufficient, or they might discover, as they are working to put forward their plans, that there are not enough compensatory, like-for-like measures—those at the top of the hierarchy—in order for them to deliver adequate compensation. I will bring in Joel Hankinson on this point; he might have more detail on it, as he has been working heavily on the governance and policy around this. Developers will be able to engage with the marine directorate and also with NatureScot, both of which will have an impact on what the marine recovery fund will deliver, so they will be able to suggest mitigations. Joel will have more detail.

I add that there will also be analysis of the impact of the compensatory measures. The committee will be very familiar with the Scottish marine energy research programme, or ScotMER. The data associated with applications, and the data that goes into ScotMER about the marine environment, biodiversity and the impact on species, will also feed in to the analysis of the impact of all the compensatory measures that have been made, so that that forms part of the wider analysis. We will also share learning across the borders of the four nations.

The policy note is highlighting that there is that potential. We will work to avoid that as much as possible so that all marine industries can co-exist. All the impacts on any part of the marine sector are taken into account by MDLOT as an application goes through the consenting process.